Ahrend, Rudiger (contributor) - 2008
level of policy rates to be a function of the output gap, divergences
of actual rates of inflation from a target, and the …*) + λ
2
(GAP)
with r
T
being the Taylor interest rate, π the rate of inflation as measured by core CPI,
5
π* the … desired rate of
inflation, r* the assumed real “neutral” rate, and GAP the output gap. λ
1
and λ
2
are the weights given to …